By Joseph Adinolfi
The U.S. dollar’s status as one of the few dependable safe havens for investors during this year’s market mayhem started to erode during the fourth quarter, even as the greenback posted its biggest yearly advance since 2015.
For much of the year, the dollar’s strength was blamed for helping to weigh on stocks, as a more expensive currency ate into export revenues and corporate profits while higher Treasury yields made bonds increasingly attractive relative to stocks.
But something changed for the dollar around the beginning of the fourth quarter. Central banks in Europe and — more recently — Japan applied a more aggressive monetary policy, signaling that they intend to close the gap with higher U.S. yields created by the Federal Reserve. This helped to drive their currencies higher.
At the same time, investors in the U.S. were betting that the Fed’s campaign of interest rate rises was drawing…
